Pressure is mounting on the 13-member board to improve profits at the hands of farmers at a time when their input costs (for corn products, cattle-feed and de-oiled cakes) are up by 25-50% in the last one year. The board is mulling over the feasibility of entertaining joint ventures to tap global markets without hurting Amul’s brand equity or growth in India.

Though global food majors such as Mars, Kraft Foods, Danone and LandoLakes visited India recently, GCMMF is clearly unwilling to help the growth of competing brands at the cost of is own brand. Most of the global brands are courting GCMMF to leverage its distribution strength for their brands in the attractive Indian market and build India as a hub for low-cost milk supplies.

Amul's interest in a JV with a global partner is to gain a foot hold in new markets and ensure higher profit margins at the farm gate. But the interest in improving farm profits by tapping the massive growth opportunities in foreign shores comes with the worry about protecting brand Amul.

Average cow milk prices at the farm gate in India is Rs 11-12 per litre against Rs 25-30 per litre in US and Europe. Reduced subsidies has eliminated milk surpluses in Europe and slowed production growth in the United States, according to international reports. Government surpluses are no longer available in dairy-producing countries such as the United States, the largest exporter of milk powder, and the EU, the largest exporter of cheese.

India is the world’s largest milk producer at 100 million metric tonne while US is second largest at 75 million metric tonne. But milk production in US is growing at 1% while that of India is growing at 4.5%. By 2020, India will produce about 220 million metric tonne. Industry experts say India is probably the only major milk producer with a minimal share in international milk trade. Also, milk products consumption in markets like the Middle East, Southeast Asian countries and China have picked up substantially and is growing at over 35% per annum.

“Given the huge gap, it makes sense to tap global markets. But we cannot afford to lose sight of India when the world wants to capture the Indian market. The question is to what extent can we tap the opportunities by getting the right partner. Every one wants to use our processes and systems to build their brands. Why should we let other brands grow at the cost of Amul?" says GCMMF managing director B M Vyas.

Source: Economic Times